Novell Q4 Sales Slip While Losses Mount

Though momentum continues to build elsewhere, sales fail to meet expectations

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Although investors have gone crazy for Novell in 2003, customers haven't. Nothing more clearly illustrates that than the results Novell reported Thursday for its fiscal fourth quarter ended Oct. 31.

For the period, Novell reported revenue of $287 million, down 4.5 percent from one year ago. Losses for the period, meantime, climbed to $109 million from $92 million one year ago. The amount includes $130 million in nonrecurring charges relating, for the most part, to net-deferred tax assets.

For the year, Novell reported revenue of $1.1 billion and a net loss of $162 million. Last year, revenue totaled $1.1 billion while losses totaled $247 million.

Commenting on behalf of the company about the quarter and recent developments, Novell CEO Jack Messman told financial analysts in a conference call Thursday he was disappointed that certain things did not go as planned during the quarter, but was otherwise encouraged by the progress Novell is making turning around its business around. On the down side, Novell missed shipment deadlines on certain security products. (They're now expected to ship this quarter.) Novell also saw core NetWare sales continue to slide by double digits and days sales outstanding (DSO) increase to 74 days from 70 during the fourth quarter. Most troubling, perhaps, was the drop in new license sales, which plunged in the quarter to $70.5 million from $94.3 million.

Conversely, Novell recorded its single largest operating profit this quarter since fiscal 2000. The Provo, Utah-based company has also made progress integrating Ximian, a company purchased earlier in the year. More recently, it announced a deal to acquire SuSE Linux. The $210 million cash offer for the German-based distributor of Linux software was announced in early November ,just after the close of the fourth quarter.

Coupled with the company's decision to port core NetWare services to the Linux kernel and a $50 million investment in Novell by IBM, the potential merger with SuSE Linux has driven shares of Novell stock up sharply. As recent as August, Novell shares traded for around $3.50. At the close of trading Thursday, they traded for $8.77 each.

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